Mo Yan talks to the media during a news conference in his hometown Gaomi, Shandong province. Photograph: China Daily/REUTERS

Author Mo Yan has become the first Chinese citizen to win the Nobel prize for literature, a decision that sparked rejoicing but some criticism in his homeland.

State media celebrated Mo's win and the Nobel website rapidly filled with comments from Chinese users expressing pride at his triumph.

The Swedish Academy, which decides on the award, said the novelist's "hallucinatory realism" merged folk tales, history and the contemporary, and created a world reminiscent of those forged by William Faulkner and Gabriel García Márquez.

"He writes about the peasantry, about life in the countryside, about people struggling to survive, struggling for their dignity, sometimes winning but most of the time losing," said the academy's secretary, Peter Englund.

Mo could not be reached for comment, but he told the judges he was "overjoyed and scared", Englund said.

The 57-year-old author's real name is Guan Moye but he took his pen name, which translates as "don't speak", to remind him of the dangers of saying too much.

"His work is always unique … Since Red Sorghum, he has for the past 30 years consistently been at a peak of creativity. That is not easy. Many writers have ups and downs, but he keeps himself at his writing peak," Yan Lianke, another highly regarded novelist, said.

He added that the award was a recognition of Chinese literature. This was a widespread feeling in China, where, according to Beijing-based literary translator Brendan O'Kane, writers feel Chinese literature is not comprehensible to the rest of the world. "This will be a huge confidence boost," he said.

The only other Chinese winner was Gao Xingjian, who took the 2000 prize, but he lives in exile as a French citizen and his works are banned on the mainland. The Chinese foreign ministry complained at the time that the prize had "been used for ulterior political motives" – though Mo praised Gao's "enormous contribution" to Chinese literature.

This time, the national broadcaster broke into the evening news to announce the decision and news sites ran Mo's photograph on their front pages. While many saw Mo's triumph as epitomising the country's advance, others complained he had been too cosy with the authorities.

When Nobel judges gave the peace prize to another writer – jailed dissident Liu Xiaobo – two years ago, Mo said he did not know much about the case and did not want to discuss it. He also withdrew from the Frankfurt Book Fair in 2009 because dissident writers were attending.

Ai Weiwei, the outspoken artist detained last year, said Mo might have literary achievements, but noted: "As an intellectual, I think he's not a conscious one. He has been very clearly pursuing the party's line and in several cases he has shown no respect for the independence of intellectuals."

Others think that Mo has been tarred unfairly as a government stooge.

"He's not a political risk taker, but he's nobody's lackey," said Eric Abrahamsen, a literary translator who has interpreted for Mo at several events.

"He is very politically astute… [but] he doesn't write what he is told."

Supporters argue that he has frequently addressed difficult issues, although staying within the government's red lines; his last novel, Frog, tackled population control and forced abortions.

"He was instrumental in reviving Chinese literary language after the Cultural Revolution," said Abrahamsen.

"He has also done the best job of tackling the big social and historical issues, I think more successfully than anyone else has, taking historical facts and turned them into convincing art. That's enough, right there, to win the Nobel."

Mo published his first book in 1981 and has said he was thrilled when he earned 800 yuan (around £80) by selling the movie rights for Red Sorghum, which became a hugely successful film. The Nobel literature prize is worth 8m Swedish kronor, or about £744,000.